ALLIED IRISH Banks has lost about €13 billion in deposits since the start of the year due to concerns about the financial difficulties of the Government and the banking system, the bank said in a trading statement yesterday.
Some €12 billion of the lost deposits were withdrawn, mostly by institutional and corporate depositors, since the end of June.
The bank admitted tapping “a range of liquidity facilities from central banks, including certain additional marketwide schemes during the period of dislocation within the funding markets”.
An AIB spokesman declined to say how much it had drawn from the Central Bank in exceptional liquidity – where it can borrow using collateral that is not accepted by the European Central Bank.
The bank later said its reliance on monetary authority funding had risen to €27 billion from less than €10 billion at the end of June, while the level of collateral it use to borrow from these sources had fallen to about €11 billion from about €24 billion.
Meanwhile, financier Dermot Desmond said in a speech yesterday that AIB and Bank of Ireland should be sold to overseas buyers as the State struggles to cope with a “financial emergency”.
AIB said it was re-evaluating “certain key targets”, including its €2.9 billion estimate for bad debts from 2010 to 2012 on loans not moving to the National Asset Management Agency (Nama), in a review of the bank’s plans led by its new executive chairman David Hodgkinson.
Bad debt charges remained “elevated” during the third quarter and “broadly in line with our expectations”, said the bank, which is due to be effectively nationalised.
AIB will increase the amount it will raise in a rights issue to €6.6 billion from its previous target of €5.4 billion after deciding to shelve the sale of its UK business.
This will push the State’s ownership to about 94 per cent if no other shareholders take up the offer as the Government is underwriting the sale of new shares. AIB shares rose 4.6 per cent or almost 2c to 43.5 cents yesterday, valuing the bank at €470 million.
The State’s National Pension Reserve Fund will convert €2.9 billion of its €3.5 billion preference shares in the share sale, up from a previous level of €1.7 billion.
The run on deposits at AIB pushed up the bank’s loan-to-deposits ratio – the key barometer of a bank’s reliance on money market funding – to 159 per cent at the end of September from 151 per cent from three months earlier.
This means the bank has €100 on deposit for every €159 it has lent out.
The ratio excludes the Polish businesses which it is selling for €3.1 billion to boost capital reserves to meet the Financial Regulator’s €10.4 billion target.
The level of deposits lost was not as bad as expected, said Ciarán Callaghan, analyst at NCB Stockbrokers, given that AIB was “quasi-nationalised” and was hit by more ratings downgrades than Bank of Ireland, which lost deposits of €10 billion in August and September.
AIB said it had €10.3 billion in loans left to transfer to Nama at a discount of 60 per cent. The bank has already moved €9.2 billion in loans to Nama.
Total loans moving to the agency was reduced by €4.4 billion to €19 billion after the Government increased the threshold on eligible loans to €20 million from €5 million. AIB is writing off 56 per cent of the €4.4 billion loans.
